Politicians and editorialists like to mistake the American polity for a family, with citizens as the kiddies and the federal government as the parents. In 1984, New York Gov. Mario Cuomo became an overnight sensation after he painted Republicans as selfish parents in his speech to the Democratic National Convention. "The Republicans believe the wagon train will not make it to the frontier unless some of our old, some of our young, and some of our weak are left behind by the side of the trail," said Cuomo. "We Democrats believe that we can make it all the way with the whole family intact."
This budget season, we're hearing all sorts of appeals to family financial values. "We should approach our nation's budget as any prudent family would," said President George W. Bush in his budget address Tuesday night. (This came just after Dubya enumerated a wish list of new family spending on everything from "character education" for Junior, prescription drugs for Grandma and Grandpa, and land conservation so the whole brood could take a hike; in such a moment, he sounded less like a thoughtful dad and more like a rummy who'd just cashed his relief check). Sen. Minority Leader Thomas A. Daschle may not agree with Bush about much, but in his official response to Bush's speech, the South Dakotan agreed that we are family. "Think about your own family budget," counseled Daschle.
I'll give such rhetoric this much: In some ways, our nation is indeed like a family (albeit one with 284 million members). We share common experiences (like the O.J. Simpson trial), and we have sibling rivalries where we fret about which siblings are more successful at various activities (like getting into the University of California at Berkeley). And just like any real family, plenty of us don't speak to each other.
So it is indeed tempting to think of federal finances as family finances, only with many, many, many more zeros. Both the federal government and families, ideally, receive and spend money each month. Both, again ideally, formulate a rough spending plan, or budget, which they break as soon as someone needs something special. In the case of a family, maybe it's braces for Missy or a ski outfit for Mom; in the case of the government, maybe it's more farm subsidies, or census takers, or bombs.
But the family analogy is wrong. There's a fundamental difference between your personal finance and Daschle's national finance. You earn the money that you budget and spend, while the government takes the money that it spends. (Actually, you earn the money it spends too.) When a family has a surplus, it can decide to spend it or use it to retire debt (a mortgage, credit cards, and student loans being among the most popular forms of debt). Or it can save the surplus, socking the dollars away in a bank account, CD, money market account, or other securities. What the family would never, ever consider doing is to send it back to its source, presumably an employer or customer somewhere.
Now consider the government's options. When it finds itself with a little extra cash, it can spend it, use it to retire its debt, or send it back to the people who actually generated it. What it can't do is save it (as of yet, the federal government doesn't buy stocks or bonds). Nor can it make investments in real assets, except in the context of some non-Social Security pension programs.
"Imagine you hadn't saved for your retirement, [because] you owed money on your credit cards and you couldn't afford health insurance. Then you're told you might get some extra money sometime down the road. What would you do?" asked Daschle in his response. "Under the president's approach, you would spend the money immediately-money that you might never see-without taking care of your debts, your medical bills, or your retirement. You wouldn't do that," he emphasized. "And neither should we."
Daschle's tale is touching, commonsensical, and off-base. While there are trillions of dollars in projected surpluses–i.e., the extra money "you might get" some of over the next decade–there are already tens of billions of extra dollars floating around this very year. (Last fiscal year, excluding Social Security taxes, the federal government collected $86 billion more in taxes than it needed to fund authorized programs. That's roughly $810 per American household.)
The president's tax cut plan isn't a proposal to spend that money on consumer goods or services. In fact, that's what the Democrats would like to do: They want to keep the surplus in D.C. and spend it on new government programs. The president's proposes to let people keep (some of) it so that they, not someone in Washington, can decide how best to use it to retire their family's debt, purchase health care for their family, or save for their retirement. Or, for that matter, buy Mom that ski outfit. For many in Washington, letting people keep more of their own money is tantamount to government spending. To be sure, this is akin to a mugger complaining about a missed mark spending the bills in his wallet. But D.C.'s definition of spending–like many of its definitions–doesn't travel well outside the Beltway.
Thankfully, Bush doesn't seem to be talking that language. "The growing surplus exists because taxes are too high, and the government is charging more than it needs," he said in one of the few rhetorically memorable passages of his speech. "The people of America have been overcharged and, on their behalf, I'm here asking for a refund."
I'm just hoping they'll be something left to refund, after Bush finishes leading Congress on his shopping spree for the family.